Public Bill Committee

[Mr. Joe Benton in the Chair]

Joe Benton: Before we begin, I have a few announcements. Members may, if they wish, remove their jackets in Committee. Would all Members please ensure that mobile phones, pagers and so on are turned off or switched to silent running in Committee? I remind the Committee that there is a money resolution in connection with the Billcopies are available in the roomand that adequate notice should be given of amendments. As a general rule, my fellow Chairman and I do not intend to call starred amendments. We also do not intend to call amendments that are not signed by members of the Committee, because we assume that they would not be moved.
Briefly, I remind the Committee of the procedure at the start of todays sitting. The Committee will first consider the programme motion on the amendment paper. Debate is limited to half an hour. We will then proceed to a motion to report written evidence, before starting clause-by-clause scrutiny.

Ian Pearson: I beg to move,
That
(1) the Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 14th October) meet
(a) at 2.30 p.m. on Wednesday 15th October;
(b) at 9.00 a.m. and 1.00 p.m. on Thursday 16th October;
(2) the proceedings shall be taken in the following order: Clauses 1-5; Schedule 1; Clauses 6 to 16; Schedule 2; Clause 17; Schedule 3; Clauses 18 to 33; new Clauses; new Schedules; remaining proceedings on the Bill;
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 4.30 p.m. on Thursday 16th October.
It is a real pleasure to serve under your chairmanship, Mr. Benton, and that of Dr McCrea.
It was evident from the debate on Second Reading that there was widespread support for the principles of the Bill. However, it is right to have detailed scrutiny of a number of issues. I welcome the sittings allocated to the Bill, which should allow sufficient scrutiny to enable the Bill to be improved.

Mark Hoban: It is a pleasure to serve under your chairmanship, Mr. Benton, and that of your co-Chairman, Dr. McCrea.
As the Minister pointed out, there is widespread consensus on the Bill and its provisions. The Bill comes to us having been improved in the other place. From the amendments tabled, the Government clearly do not share that view. We have the time in our deliberations, I hope, to give proper airing to the Governments arguments for those amendments. We shall have the opportunity to argue for further refinements to the Billto improve it, so that it has the support not just of those who are beneficiaries of the proceeds that will arise from the process, but of consumers and others who are interested in how dormant accounts are identified and reunited with their rightful owners.

Question put and agreed to.

Ordered,
That, subject to the discretion of the Chairman, any written evidence received by the Committee shall be reported to the House for publication.[Mr. Pearson.]

Joe Benton: Copies of any memorandum that the Committee receives will be made available in the Committee Room.

Clause 1

Transfer of balances in reclaim fund

Jeremy Browne: I beg to move amendment No. 1, in clause 1, page 1, line 6, leave out from fund to end of line 8 and insert
(i) the balance of a dormant account that a person (the customer) holds with it, and
(ii) the name, date of birth and last known address of that customer, and.
May I join the previous speakers in welcoming you to the Chair, Mr. Benton, and say how much I am looking forward to serving under your chairmanship? I am delighted to have the opportunity to kick off the deliberations on what the Minister rightly said is a Bill that has commanded support from all parties in the House of Lords, as well as in the House of Commons. I look forward to proceeding on that basis, but with the caveat that, as the Minister knows, we disagree on some points. As the Government do not have a natural majority in the other place, they were not able to force through provisions that the majority felt could be improved. We shall now seek to improve the Bill again with amendments in Committee.
Before I turn my mind specifically to the amendment, I am bound to say that it seems faintly peculiar that, yesterday in the Chamber, we discussed how £37 billion of public money could be put into the banking system, yet today we are discussing how a rather smaller amount can be taken out to assist public funds with youth projects and similar matters. Nevertheless, we are where we are, so we shall concentrate on what is before us.

Joe Benton: Order. The hon. Gentleman is going beyond the scope of the Bill. Will he come back to the amendment?

Jeremy Browne: Sorry for pushing your patience, Mr. Benton.

Martyn Jones: I remind the hon. Gentleman that the funds to which he referred are funds not of the banks, but of people who have lost contact with their money.

Joe Benton: Order. We do not need to focus on yesterdays proceedings. Will the Committee return to the amendment?

Jeremy Browne: Absolutely. I take the blame entirely for taking us down that road.
Amendment No. 1 concerns a matter on which the Minister sought to reassure me last week on Second Reading, but I should like further reassurance about the means by which a depositor can be reunited with his or her money if he or she goes to his or her bank more than 15 years after having last touched the account. As set out in the explanatory note, the banks and buildings societies will act as agents for the reclaim fund and continue to manage the customer relationship, but the precise details of agency arrangements will be a matter for negotiation between the bank or building society and the reclaim fund.
The individual will go to his or her bank to reclaim a sumfor the sake of argument, let us say £100after which the bank will go to the reclaim fund, but at that point the reclaim fund needs to locate the money and may be unable to share sufficient details with the bank. The Minister might consider that I am concerned unduly about such matters and that the practical arrangements are better than I understand them to be, but the amendment would require the bank to transfer the customers name, date of birth and the last known address when transferring the balance of a dormant account to the reclaim fund. The purpose of the amendment is to ensure that the individuals concerned have the minimum administrative difficulty in being reunited with their money, which is why I hope that it will be supported by the Committee or that the Minister will reassure us to such an extent that it will not be necessary to press it to a Division.

Mark Hoban: The amendment raises an issue about the relationship between the reclaim fund and the bank, which body people will go to for assistance and what records the reclaim fund will be required to hold. The hon. Member for Taunton suggested that we enable the reclaim fund to trace the money that has been transferred to it by the bank. I have a slightly different worry about that and why the reclaim fund needs to have such information. If the customer goes back to the bank and the bank acknowledges that a liability is due to that customer and tries to recover from the reclaim fund the money that is due to them, which I think is how the process is meant to work, how is the reclaim fund to know that the bank has not tried to reclaim money for that customer before? What controls will be in place to ensure that the reclaim fund only pays legitimate claims to banks? If the reclaim fund has simply transferred a lump of money from bank A, how will it know which customers that sum refers to, what the breakdown of that money is between different accounts and therefore what action it needs to take?
In the other place, my noble Friend Baroness Noakes commented that the reclaim fund
could not have a proper system of internal control that did not identify the potential obligations that it took onwhich would have to be on a named basis[Official Report, House of Lords, 11 December 2007; Vol. 697, c. 67.]
Baroness Noakes made an important point. It is difficult to know how the reclaim fund could properly perform its functions without that type of information. As I mentioned earlier, how would the reclaim fund know that it was paying a valid claim that the banks had not sought to recover in respect of that customer at an earlier stage and that no one was not coming back for a second bite of the cherry?
This issue is also relevant to the other functions of the reclaim fund. If I was administering the reclaim fund, I would want to know the liabilities that were being transferred across to me. For example, if £1 million was transferred to the reclaim fund from a bank, I would want to know whether I was accepting one block of £1 million or 1 million amounts of £1, because I would take a different approach to releasing that money to the Big Lottery Fund, depending on the nature of the breakdown of the assets being transferred. That relates to the proposed change to clause 1 set out in the amendment, which would ensure that the reclaim fund knows the balance of a dormant account that a person holds with the bank. It is important that such information is transferred, so that the reclaim fund is properly protected and so that it knows the make-up of the liabilities that it is meant to assume. That would allow the fund to make repayments to the banks in a controlled fashion and to have the detailed knowledge that is necessary for making the right decisions on the amounts to release to the Big Lottery Fund.
I am pleased that the hon. Member for Taunton has tabled the amendment, because it helps to tease out the issues about how the reclaim fund will function, what controls will be in place and what data it will hold. There was a significant debate in the other place about the amount of data that the reclaim fund should have. My noble Friend tabled an amendment suggesting a confidentiality agreement that the reclaim fund could enter into, to enable it to hold more data about the holders of dormant accounts. In that case, the Government maintained that the Data Protection Act 1998 would provide sufficient protection. We accept their assurances, but it would be useful if the Minister indicated in his response what information the reclaim fund will hold on individuals to enable it to perform its duties properly.

Ian Pearson: I hope that I can give the hon. Member for Taunton the assurances that he seeks, but I believe that the amendment is unnecessary. One of the key principles behind the Bill is that the bank or building society is expected to handle customer repayments. Customers should not notice any significant change as a result of their accounts being transferred to the reclaim fund; it remains their money and if they go to their bank or building society and ask for their money, they should get it. It will then be up to the bank to make a claim on the reclaim fund. Customer records are therefore expected to be retained by the original institution, to verify claims on behalf of the reclaim fund. In practice, there should be no need for confidential customer information to be transferred routinely to the reclaim fund. I, for one, would not feel comfortable with a situation where a customers natural right to privacy within their own bank or building society was, without their knowing it, jeopardised by information being given to a third partythe reclaim fund. We do not believe that that is necessary.
As the hon. Member for Taunton will be aware, a bank or building society normally has a duty not to disclose information about its customers affairs to third parties without the customers consent. However, we recognise that, in exceptional circumstances, a customer might be unable to seek repayment from their bank or building society and the claim might need to be handled directly by the reclaim fund. That could happen, for example, in a dispute about repayment in which the reclaim fund becomes directly involved as the respondent. As a result of that eventuality, clause 14 will allow a bank or building society to transfer customer information lawfully to the reclaim fund if that is necessary to enable it to deal with claims for repayment. Such a transfer of information would otherwise breach a legal restriction on sharing information, such as the banks duty of confidentiality.

Jeremy Browne: Will the Minister give an example of circumstances where that may be necessary, as I am confused as to what they might be?

Ian Pearson: My understanding is that they would be exceptional circumstances. At the moment, in normal circumstances, banks or building societies should hold sufficient information to identify the account holder and to ensure that the money that was held in their accounts and transferred to the reclaim fund is genuinely reclaimable. Under those circumstances, there should be no need for information to be transferred. Of course, there is potential for dispute in such situationsfor example, a bank or building society might no longer exist, and the records might be imperfect. Clause 14 is intended to deal with such exceptional circumstances. The principle that we should not routinely transfer data that give private information about an individual to the reclaim fund is correct. Normal account details should remain with a bank or building society.

Jeremy Browne: I understand the Ministers point about not transferring data beyond what is necessary. In practical terms, however, presumably I could go along to a bank where I had an account with £100 in it that I had not touched for 10 years, withdraw the money and walk out with £100 in cash. If I had a bank account that I had not touched for 20 years, could I similarly go in and walk out with my £100? Would there be a delay or complications because that money, having passed the 15-year threshold, had gone into the reclaim fund? Could the bank say, Sorry, well have to process it, and it will take a certain amount of time? Would I, as the customer, notice the difference between an account that had not passed the 15-year threshold and one that had?

Ian Pearson: Subject to verification checks, which one would expect a bank or building society to want if someone had not been in touch with them for 15 or 20 years, a person should be able to get the money immediately. If the money has been transferred, it will be up to the bank or building society to get it back from the reclaim fund. A customer can walk into a bank or building society and get the money that is rightfully theirs. The bank or building society should have already written to the individual to alert them to the possibility that the money might be dormant. If they had not received any information back from the customer, after 15 years the money could be transferred into the reclaim fund. The principle that someone can get their money back by going to their bank or building society and having some simple verification checks is right, and it is one of the reasons why banks and building societies should maintain official data that can be verified so that customers can get their money as easily as possible. Overall, I do not believe that the amendment is necessary.
Let me respond briefly to the point made by the hon. Member for Fareham. When money is transferred to the reclaim fund, there should be sufficient informationbut not personal detailsto enable the reclaim fund, when producing its business plan, to make some assessment of the likelihood of dormant funds being repatriated. We discussed on Second Reading the need for a balanced decision to be taken by the reclaim fund on that basis. There will be information that enables the reclaim fund to take those decisions, but customers details will not be routinely passed to the reclaim fund. We do not believe that to be necessary.

Mark Hoban: I am grateful to the Minister for that clarification. What type of information does he envisage being passed across by the banks or building societies to the reclaim fund? Will it have a breakdown of the individual account balances that have been transferred across, on a numbers basis? Will they know for how long an account has been dormant, again on a numbers basis? What sort of information will they get to enable them to make such a judgment, which we all agree is a fundamental part of making sure that the scheme works?

Ian Pearson: My understanding is that fairly high-level information will be provided. Individual accounts will not be subject to in-flight refuelling. My advisers suggest that that will be a matter for agency agreement and not for the Bill. As regards the general principles involved, we need sufficient high-level informationto be clarified in agency agreementto be provided to enable the reclaim fund to understand how many customers accounts have been transferred to it, the age profile of those accounts and the quantums involved. The reclaim fund need not necessarily know exactly which individuals are having accounts transferred into it. The Bill allows for the provision of information that is likely to be necessary to repay customers. Other than that, it will be a matter for agency agreement. I appreciate that the hon. Member for Fareham is making a probing point. The reclaim fund needs sufficient information to be able to have a properly functioning business plan and to conduct the work that we want it to do, which is to transfer money to good causes.

Mark Hoban: I have been reassured by Minister. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ian Pearson: I beg to move amendment No. 8, in clause 1, page 1, line 15, at end insert
( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.
In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed..

Joe Benton: With this it will be convenient to discuss Government amendment No. 10.

Ian Pearson: The amendments are technical and arise from debates in the other place. Our consistent position has been that all accounts should be eligible for transfer into the scheme, provided that they meet the test of dormancy set out in the Bill. That includes accounts opened a long time ago. As the Bill is currently drafted, if a customer dies it is not possible for their balance to be transferred to the reclaim fund and the banks liability extinguished, because the account is not one that the customer holds with the bank. That presents difficulties, as banks will not know whether older, inactive accounts are owned by living or deceased persons. We certainly intend to address that point, which was raised in the other place. It is unlikely that banks or building societies would know whether account holders were living or deceased. We appreciate what the banks and building societies have told usthat they wish to have certainty on that point so that they are not constrained in their ability to participate in the scheme. We are happy to propose the amendments, which are a technical clarification confirming that the accounts owned by deceased persons are eligible for transfer into the scheme.

Mark Hoban: I am grateful to the Minister for that clarification of the purpose of the amendments. He will be aware of concerns outside the Committee about how accounts belonging to deceased persons can be reunited with the people to whom they have been bequeathed in a will. Does the measure make it easier or more difficult for that process to take place?

Ian Pearson: My understanding is that it makes no difference.

Amendment agreed to.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2

Transfer of balances to charities, with proportion to reclaim fund

Ian Pearson: I beg to move amendment No. 9, in clause 2, page 2, line 1, leave out building society or a smaller bank and insert smaller bank or building society.

Joe Benton: With this it will be convenient to discuss Government amendments Nos. 11 to 13.

Ian Pearson: The amendments intend to bring the Bill back to the state in which it was originally introduced. It is right to have a significant debate on the objectives of the small and local schemes. I would like to remind the Committee about the objective of the Bill, which is to facilitate fair and efficient distribution of funds in dormant accounts for the benefit of society.
We recognise that small banks and building societies often play a key role in supporting and engaging with our local communities. It has always been clear that small, locally based institutions should be able to focus dormant account assets on needs in their local communities. That was announced as far back as the pre-Budget report of 2005. In consultation with the bank and building society sector, we have identified £7 billion as a credible threshold to define small and locally based institutions. The Building Societies Association advised us that of those building societies with less than that amount in total assets, more than 90 per cent. have all their branches within 70 miles of their head office. We consulted on the suitability of that threshold for identifying small, locally based institutions, and the majority of respondents who expressed a view believed the limit to be appropriate. The Government are fully committed to supporting mutual organisations and recognise the many benefits that such organisations bring to society and communities across the United Kingdom. We recently introduced new legislation to support the sector, including improving the rights relating to member shares and improving procedures involved in transferring business to the subsidiary of another mutual.
The vast majority of building societies will be eligible for the alternative scheme. The BSA advises that 50 out of their 59 membersnearly 85 per cent.will be eligible. On Second Reading, it was helpfully pointed out that building societies which will not be eligible hold a large proportion of the dormant account funds in that sector. To be precise, the BSA has estimated that £100 million of the £130 million in dormant accounts in the sector lie in the larger institutions. I am aware of the views that have been regularly expressed by Nationwide building society. Much has been said of the great need in the areas to which spending priorities in the scheme have been directed, particularly the need for youth facilities and for improving financial capability and inclusion. One of the key messages on Second Reading was the strong support across the House for investment in youth facilities and in matters of financial capability and inclusion.
One of the reasons behind the scheme is that, if the larger building societies do not take part in the main scheme, the funds for the spending priorities will be heavily impacted on. We are aware that banks and building societies support a variety of good causes in different communities and, of course, we fully support such laudable objectives. However, are banks and buildings societies really in the best position to consider consistently the needs of wider communities throughout the United Kingdom? We have identified the good causes following an extensive consultation exercise in England, and other Administrations have similarly consulted. We think that it is right to proceed with the scheme. If we were to allow all dormant account money to be administered through multiple individual foundations, it would inevitably lead to significant overlaps and potentially large gaps in provision. It is in the interests of a fair and efficient distribution of funds to have a centralised national distribution scheme.

Jeremy Browne: Is the Minister satisfied that the £7 billion threshold is still appropriately pitched, given the events of the past few weeks and months?

Ian Pearson: Yes, I am. I have asked that question of officials. Obviously, there have been changes during the past few weeks and months, but I am confident that an asset limit of £7 billion strikes the right balance and enables us to have a scheme of a sufficient size that it can be efficient in its distribution of funds.
We very much welcome the recent BSA statement in support of the Bill as it was introduced to Parliament, which is what the amendments are designed to achieve. The Governments proposals for an alternative scheme for smaller financial institutions have also been welcomed by the BSA. We also welcome its statement expressing its members commitment to making the scheme a success and their intention to participate in it, as we do the British Banking Associations statement confirming commitments to participate from banking groups representing 90 per cent. of the UK retail banking market.
The proposed scheme is designed to be simple and efficient, to minimise costs to institutions and the scheme overall, and to maximise funds for distribution. The asset limit provides a balance between giving small, locally based banks and building societies the flexibility to benefit directly their local communities against maximising the assets for the main scheme, which will be operated through the Big Lottery Fund to give money to good causes. We believe that the amendments will produce the alternative scheme for small, locally based institutions, which is what small banks and building societies want.

Mark Hoban: The matter under discussion was the subject of significant debate in the other place, and I happen to think that the balance of debate there was right. Building societies are in a particular position in our society and they differ from banks. We are talking about the money not only of customers, but of members of a building society. The society is a mutual and the money is its members money. I am conscious that members of building societies have made decisions about how building societies should operate. For example, at its last annual general meeting, members of Nationwide agreed to a commitment that 1 per cent. of its profits should be allocated to charitable purposes.
There is a strong belief in those organisations, which is one reason why there is so much support for mutuals throughout the House. The mutual nature of such organisations gives them different status; they see their mutuality as a distinctive selling point compared with other institutions. To carve out one group from the whole population says that there is almost a two-tier category of building society: those that are of sufficient size and thus will be dealt with on a different basis when it comes to dormant accounts and those that will be allowed to continue to use their members funds when there are dormant accounts to benefit the communities in which they are based. That creates an unhelpful distinction.
The hon. Member for Taunton asked whether the asset limit of £7 billion is right. From the Ministers justification of the Bill, a better measure is the one that he used on the concentration of branchesto what extent does a building society serve a well-defined local community?

Ian Pearson: I am not sure how this is helping the hon. Gentlemans argument. My argument is that it is right to have a small and local scheme, and that small building societies, which generally serve local or regional and sub-regional communities, are in a different place from the larger building societies, which have extensive branch networks and customers throughout the United Kingdom.
The hon. Gentleman mentioned the Nationwide building society. I have enormous respect for the Nationwide and its policy on giving money to good causes, but it has 14 million customers and is about to acquire the Derbyshire building society, which will make it even larger. It does not help his argument to say that we should treat all building societies the same. The Nationwide is of sufficient size that it deserves to be regarded as an institution on a par with some of our banks, and it is right in that case that it participate in the wider reclaim scheme, which will give money to good causes through the Big Lottery Fund.

Mark Hoban: Again, the Minister points out two communities that could lose out as a consequence of this measure. The communities of customers being served by the Derbyshire and Cheshire building societies would benefit if dormant accounts were sitting there and those societies were not taken over by or merged withI am not sure what the technical language isthe Nationwide. Now, those accounts will be lost in the big pot that will be transferred to the Big Lottery Fund. The communities that those two building societies serve could have used dormant accounts to help particular projects in their area. Let us not forget, these building societies have been built over time through the agglomeration of smaller building societies.
We are in danger of losing the potential for local links for larger building societies and creating two different sets of building society. It boils down to the Ministers argument that the Government want more money for the good causes. We support the three spending priorities that are set out in the Bill and we want to see those work well, but the scheme is voluntary, there is competition and there is tension between the scheme and recognising the principle of mutuality and how members of building societies and the local communities that they support should be able to benefit.
A second issue arises from the £7 billion limit, which is what happens when the value of the assets fluctuates. When is a scheme in or out? If a building society shrinks its lending book and has lower assets, one year it will be over the £7 billion limit, the next it will be under. That does not create a stable base on which to operate.
There is regular discussion on the financial pages about de-leveraging. That could lead to shrinkage in the size of some of those building societies, which would suddenly go below the threshold. I think I am right in saying that the Skipton building society has recently gone over the £7 billion limit, although it might find itself going below that threshold, so even the threshold does not quite work. The Government are making an artificial distinction. It does not sit well with the treatment given to the vast majority of building societies, and it is a retrograde step to restore the Bill to how it was before it was, I believe, improved in the Lords.

Ian Pearson: Clearly, there is a difference of opinion between us on the matter, but let me have one more go at reassuring the hon. Gentleman. We want co-ordination and a fund of sufficient size to give money to good causes. I repeat that youth provision, financial inclusion and capability are important areas, and they have been recognised widely as such here and in the other place.
The hon. Gentleman seemed to suggest that having a small and local scheme will create an artificial distinction. I do not agree. Building societies are all not the same. They vary enormously in size, and many small and local building societies are primarily locally and regionally focused. Clearly, some societies with many millions of customers are not, and it is not the case that building societies will be disadvantaged in any way by participating in the reclaim fund and the scheme if they are of sufficient size.
The Big Lottery Fund has already proved that it can invest effectively in projects at local level and will continue to do so. If Nationwide participates in the reclaim fund and the scheme, I am sure that many of its members will benefit from the reclaim fund through the Big Lottery Fund at local level. I must say to the hon. Gentleman that large building societies such as the Nationwide are national. The clue is in the title. They are not small and local, and I do not think it unreasonable to have a small and local scheme.

Mark Hoban: The Ministers argument is rather spurious, given the existence of building societies such as the Chelsea, which has its headquarters in Cheltenham, as well as the Yorkshire and the Skipton. To say that the clue is in the name is not the best argument that he can make in Committee.

Ian Pearson: I understand the hon. Gentlemans point, but it plays to what I am saying as well. A number of building societies have names that might imply that they are regional, such as the Yorkshire, although in actual fact they operate very much on a national basis.

Janet Dean: Has my hon. Friend estimated how much less there would be for good causes, such as youth facilities, if large building societies were allowed to opt out of the scheme?

Ian Pearson: The best figures that we have available show that, of the £130 million that we estimate would be classified as dormant and be transferred to the reclaim fund in the first instance, £100 million would come from building societies with assets in excess of £7 billion. By the way, that includes the Derbyshire, which, although it is being acquired by the Nationwide, is already above the £7 billion threshold. We are saying that if the Bill remains as amended in the other place, £100 million will not go into the reclaim fund and then, I hope, out to the Big Lottery Fund for distribution.
Without wanting to be in any way critical of large building societies, which I am emphatically not, having a scheme of sufficient size to be able to operate strategically, which is our intention, is the right thing to do. It is also important that we make provision for small and local building societies. That is the balance we struck as a result of the consultation exercise. The BSA is happy with our amendments and the approach that we want to follow.
I hope that I have has reassured the hon. Member for Fareham, although I suspect that I have not done so entirely.

Question put, That the amendment be made:

The Committee divided: Ayes 8, Noes 5.

Question accordingly agreed to.

Amendments made: No. 10, in clause 2, page 2, line 19, at end insert
( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.
In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed..
No. 11, in clause 2, page 2, line 27, after bank, insert or building society.[Ian Pearson.]

Clause 2, as amended, ordered to stand part of the Bill.

Clause 3

The assets-limit condition

Amendments made: No. 12, in clause 3, page 2, line 43, after bank, insert or building society.
No. 13, in clause 3, page 2, line 46, after bank, insert or building society.[Ian Pearson.]

Jeremy Browne: I beg to move amendment No. 2, in clause 3, page 3, line 11, leave out from section to end of line 11 and insert
may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons..
I will be brief. I declined to contribute to discussions on previous clauses because I thought that I would keep my powder dry for the point I make now. The £7 billion threshold is clearly controversial; a substantial body of opinion believes that there should be no threshold at all. So the amendment would require the Government to use a positive resolution if they wished to alter the threshold, rather than a negative resolution, which is the current arrangement.
Opposition parties routinely use this device in Committee to try to make the Government more accountable to Parliament, and perhaps there is something slightly ritualistic in the way that amendments are tabled to that effect. In this instance, however, a serious point is being made: it would not be appropriateindeed, it would be a slight breach of faithfor the Government to alter the threshold in a way that substantially changed the legislation and the impact on small communities that would otherwise benefit, without proper reference to Parliament. That is the motivation behind amendment No. 2.
Unlike other amendments moved by Opposition parties, which the Governmentby virtue of having the majority of members of the Committeemay wish to disregard, they might want to look more sympathetically on this proposal. Unless they have malign or hidden motivesI have no reason to believe that they haveI cannot understand why they would wish to reject the amendment.

Ian Pearson: We identified, in consultation with the industry, the £7 billion limit as a credible threshold to define small locally based institutions, and it is enshrined in clause 3. The amendment asks us to use the affirmative procedure rather than the negative power in the Bill. I say to the hon. Member for Taunton that we recognise the concerns that were expressed in the other place about the suitability of the £7 billion limit, and we have recently discussed those concerns.
There is provision in the Bill for the asset limit to be adjusted by Government order, so that it can continue appropriately to identify small and local institutions in the future, which is its purpose. The most likely reason for changing the limit would be a technical matter, such as inflationary adjustment. We therefore consider that a negative power is appropriate, given the scope of the power and the interest that it is likely to raise.
The Delegated Powers and Regulatory Reform Committee confirmed that a sufficient case had been made for the power, and it did not consider the power nor the scrutiny that we are proposingthe negative procedureto be inappropriate. For those reasons, we believe that the hon. Gentlemans amendment is unnecessary, and we will oppose it.

Jeremy Browne: I am disappointed. I understand the point that the Minister is making: if the limit will be adjusted due to inflation or other incremental changes that take place from year to year, we do not need a full-scale discussion, but I witnessed in the Chamber last week large parts of the provisions for banking being made under terrorism legislation, so I am cautious about the Government using powers created for one reason to achieve different purposes at a later date. It is perfectly possible that the Government could reduce the threshold substantially without proper reference to Parliament. That concerns me, but I sense that I have not persuaded the majority of members of the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3, as amended, ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5

Functions etc of a reclaim fund

Mark Hoban: I beg to move amendment No. 26, in clause 5, page 4, line 32, at end insert
(4A) Any direction given under this section may not be made unless a draft statutory instrument containing such a direction has been laid before, and approved by a resolution of, each House of Parliament..
The amendment continues in the spirit of the previous amendment tabled by the hon. Member for Taunton, and I am not sure whether it holds any greater chance of success. I want to introduce into clause 5 a power to ensure that, where the Government issue a direction to the reclaim fund, that direction is subject to parliamentary scrutiny. As the Government frequently point outdoubtless they will do so again today, perhaps when we have a stand part debate on the clausethe reclaim fund is a private company and the Government will not have a great deal to do with it. As with any other private company, it will be regulated by the Financial Services Authority. Yet, when we look at the detail of the clause, subsection (4) will give the Treasury the right to give a direction to the reclaim fund, requiring it
to give effect to any specified object that it has, or...to comply with any specified obligation or prohibition imposed on it by a provision that its articles of association are required to make under Schedule 1.
We touched on the issue briefly on Second Reading last week. I asked the Minister if it would be possible for the Treasury to give a direction to the reclaim fund to transfer more money to the Big Lottery Fund. After a while, we got the answerI paraphrase significantlyyes. It will be possible, in exceptional circumstances, to use the power of direction to encourage or require the fund to transfer more money.
If the Government intend to have such power of direction, it should be subject to proper parliamentary scrutiny. In such circumstances, the Government would be saying, We do not agree with the prudent decision that the board of the reclaim fund has made to hold back this amount of money. We believe that, in the interests of maximising the amount of money in the Big Lottery Fund, the right decision is to transfer across another £20 million, £30 million or £40 million. The Governments exercising such powers without parliamentary scrutiny is not appropriate. What if the reclaim fund is left short? We had the assurance in the other place that the financial services compensation scheme would meet the needs of customers, but it would not be satisfactory for the private sector to pick up a shortfall through the FSCS.
There is a need for proper parliamentary scrutiny of the directions that the Government can give to the reclaim fund. Without that, the directors of the reclaim fund will be in a difficult position. We are giving the Treasury powers without proper parliamentary scrutiny. The Minister ought to accept the amendment, in the spirit of trying to improve the scrutiny of the operation of the reclaim fund. We are told that the fund is a private body; but at the end of the day, it will be subject to those Treasury directions.

Ian Pearson: I understand the intention of the amendment, which is to probe the Treasurys use of its power to direct the reclaim fund to comply with the legislation and to ensure greater parliamentary scrutiny. We touched on the issue on Second Reading. I hope that the comments that I can put on the record today will help to give the hon. Member for Fareham and others watching the proceedings some reassurance.
Clause 5 contains a direction-making power, as the hon. Gentleman said. We see it as an ultimate safeguard, which allows the Treasury to take action to ensure that a reclaim fund complies with the requirements to which it will be subject as a result of the Bill. I want to emphasise that the direction will do no more than require the reclaim fund to give effect to, or comply with, the requirements to which it is already subject under the Bill, which will have been approved by Parliament.
Let me be as clear as I can about how I see the power being used. The Financial Services Authority will authorise the reclaim fund and put in place ongoing prudential regulation, to ensure that the reclaim fund has sufficient money to repay customers. That is in keeping with the FSAs roles of financial regulation and consumer protection. It is not expected to go beyond its statutory objectives and make rules that govern other areas of the reclaim funds operations. The Government do not envisage using the direction-making power in the Bill to interfere in any way in the day-to-day running of the reclaim fund and the management of its money. It will be the FSAs sole responsibility to regulate the reclaim fund for prudential purposes.
The power is an ultimate sanction, which the public would reasonably expect us to have to ensure that the reclaim fund functions in accordance with its articles of association, particularly in those areas that the FSA will not regulate for prudential purposes. That is an important point. Such areas include, in principle, the requirements in schedule 1for example, the publication of information by the reclaim fund, the use of money to cover reasonable money costs or the requirements elsewhere to transfer surplus money to the Big Lottery Fund.
Again, I emphasise that we do not expect to use this power. These issues are primarily a matter for the companys directors and members, but the power gives us the ability to act in exceptional circumstances. That is all. It is not a question of using a direction if we just had an honest disagreement about the distribution policy of the reclaim fund. It would be used if there were in our view a fundamental breach of the companys responsibilities that have been set out in legislation. Only in those circumstances would we want to act without delay in the interests of account holders.

Mark Hoban: I find it difficult to comprehend what exceptional circumstances the Minister refers to, since he does not appear to mean an honest disagreement between the reclaim fund and the Government about the amount being transferred. Will he give a better example of the areas where the Government feel that they might have to give directions to the reclaim fund?

Ian Pearson: We do not have particular areas specifically in mind because we do not anticipate any problems. This is a voluntary scheme. A private company is going to be set up in accordance with the legislation, and we have confidence that it will appoint people who will run the reclaim fund in an effective way. This is very much a back-up power in the case of unexpected circumstances.

Charles Walker: I imagine that the reclaim fund will be carrying a balance. What will be the rules for investing that balance? Will it have to keep it in cash or will it be allowed to make investments? If it is allowed to make investments, will it invest, for example, in Government bonds and public bonds, or in Icelandic banks?

Ian Pearson: I seriously doubt that it will invest in Icelandic banks. This is not a matter for primary legislation. It will be up to the private company to decide how it manages its money for the length of time for which it has it, the extent and size of a contingency fund for moneys that will be reunited with customers, and the extent of the funding requirements that it will pass on to the BLF.
In response to the hon. Member for Fareham, I stress that we see this very much as a back-up power to be applied if there were a clear breach of a companys articles of association. This would include failure to publish information, as we want the reclaim fund to operate transparently. Serious concerns about the behaviour of the company might warrant the Government wanting to take action, and we think there should be a power there. I hope that I have reassured the hon. Gentleman that we do not intend to use this power routinelyit should be considered wholly exceptional.

Mark Field: Does the Minister accept and recognise the heart of the concern that has been raised by my hon. Friend the Member for Fareham in tabling the amendment? Whereas in national lottery legislation there is a clear delineation between the raising of the money and its distribution, with the latter being in the hands of the BLF, in this instance, even with the exceptional use of these powers, there will be a muddying of the water in that the power of distribution will no longer be exclusively in the hands of the Big Lottery Fund, as we shall see when we discuss later clauses dealing with precisely how the powers will operate. That is the nub of my concern. There should at least be some opportunity for Parliament to have its say through the statutory instrument provision.

Ian Pearson: I understand the hon. Gentlemans point. However, the reclaim fund will be set up as a private company and incorporated under UK company law. It will have articles of association and be regulated by the FSA. We will have a power under the Bill that can be used in exceptional circumstances if we believe that the company is in breach of its articles of association. That situation would not be normal. The normal situation will be that the company collects money that is given to it by banks and building societies from dormant accounts. It will have a business plan whereby it makes decisions about how much of that money can be distributed to the BLF, which will then issue it to good causes, and how much needs to be kept back as a proper contingency against future claims on the reclaim fund from existing customers with dormant accounts. Only in exceptional circumstances might the Government need to exercise a power to require the reclaim fund to do certain things. I do not think that it would happen, but if the reclaim fund suddenly decided that it did not want to publish information and there were serious concerns about the propriety of how the company was being run, the taxpayer would want the Government to intervene. That is the reason for the back-up. We do not intend to use it other than in wholly exceptional circumstances. It is normal to have reserve powers of that sort under legislation.

Charles Walker: Will the Minister clarify whether a private company will pay corporation tax on any surpluses that it builds up in its accounts?

Ian Pearson: I do not have information on tax status to hand, but I will make sure that the hon. Gentleman receives it during our sitting.
I hope that I have explained the exceptional nature of the power that is being taken and why we do not support the amendment. As we have seen from the events of the past few days, it is sometimes necessary to intervene in a time of unexpected crisis. Having the power to do so is a good thing, and I would like to think that in this week, of all weeks, Opposition Members appreciate that too.

Mark Hoban: Perhaps the directors of the reclaim fund would be grateful that the Government lost their 42-day provision in the House of Lords last night, as otherwise they could be detained without trial in exceptional circumstances.
In reassuring the Committee about the exceptional nature of the powers to intervene and when they might be exercised, the Minister almost makes the argument for why parliamentary scrutiny of such matters would not be a bad thing. It will not be a daily occurrence. We will not have to sit here week in, week out, approving directions. The powers will be exceptional, and as such need parliamentary scrutiny.

Jeremy Browne: I would find it immensely reassuring if the hon. Gentleman could assure me that, in the unlikely event of a Conservative victory at the next general election, such a provision would be a priority on which to legislate at the beginning of the new Parliament.

Mark Hoban: One thing that I learned when I was a member of the Finance Bill Committee is that I could give way to too often to the hon. Gentleman. I shall not go down that route, because he will change his policy before we know it.
The Minister said that the scheme is voluntary, that the company is private and that it will be regulated by the FSA. Would we expect the Treasury to have these powers in the first place? I think that most people would say not. If the Treasury does have powers to give direction it is important that, given their exceptional nature, they are not to be used willy-nilly but only in a moment of crisis.

Ian Pearson: In times of crisis we sometimes have to act extremely quickly. I stress that we expect to use the powers only in exceptional circumstances, but I will give the hon. Gentleman a hypothetical situation. If the company directors of the reclaim fund suddenly wanted to make an investment decision to put £200 million into an Icelandic bank and the Government got wind of that, it would be a good idea to stop them. We could not lay an order in the House and then debate it before taking action, which is what we would have to do under the affirmative procedure. In such exceptional circumstances we might need to act very quickly, which is why the negative procedure is the appropriate to way to operate.

Mark Hoban: I am not sure whether the Ministers example is a good one. When the Government took Northern Rock into what was then called temporary public ownership, we had not debated the affirmative resolution before the decision was made and nationalisation had gone ahead. If the Treasury is going to use the powers in exceptional circumstances and they will be reserved for such cases, there should be proper parliamentary scrutiny of the exercise of those powers. This will give the Government power to intervene in a voluntary scheme run by a private company, and that cuts across the nature of the scheme by undermining its voluntary nature. The Minister has not given a satisfactory explanation of why we should not go down the affirmative resolution route.

Question put, That the amendment be made:

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Mark Hoban: I want to spend a couple of minutes trying to understand more about the reclaim fund, because it is one of the key elements of the Bill. It will be required to hold sufficient reserves to meet the repayment of account balances that banks have deemed to be dormant. This is an opportunity for the Minister to say a little more about how the reclaim fund will work in practice. The point was made in the previous debate that this will be a private company, but will the Minister indicate who will actually establish it? Will it be established at the direction of the Treasury, or will it be established by the banks and building societies as part of their involvement in the scheme?
The reclaim fund has an important role in regulating the flow of money to the Big Lottery Fund from dormant accounts and in ensuring that sufficient reserves are in place. Will there be a consumer representative on the board of the reclaim fund to ensure that consumer interests are safeguarded and that any distribution policy will strike the right balance between feeding the distribution fund and meeting the repayment claims from customers? How would it set about establishing the right reserves for repayments? [Interruption.]

Joe Benton: Order. I am sorry but the background noise is getting a little high. I do not know whether the acoustics of the room do not help, but it is getting difficult to hear. I ask people to keep the noise down.

Mark Hoban: Thank you, Mr. Benton.
Will the reserving be dictated by the prudential regulation of the reclaim fund by the FSA, or will the directors be required to come up with their own reserving strategy, which might lead to balances being held in the company in excess of those required by the FSA? I was going to ask what sort of information the reclaim fund would have, but we have discussed that under amendment No. 1.
One theme that ran through the debate on Second Reading was that of ensuring that the costs associated with the scheme were kept to a minimum. What discussions has the Minister or his officials had with banks and building societies about the projected costs of administering the reclaim fund? The higher the cost, the less money will be available to distribute to the Big Lottery Fund and the three spending priorities. Will those costs be borne by the banks and building societies, or will they be paid for out of the dormant accounts balances transferred to the fund?
One of the reasons why the Bill took longer than expected in the Lords was that the opacity around the operation of the reclaim fund detained their lordships for some time. I hope that there are clearer answers now than there were earlier this year.

Ian Pearson: The clause defines a reclaim fund as the body that will receive dormant account money from banks and building societies, by setting out criteria that must be written into its constitution. It will ensure that the reclaim fund uses dormant accounts money only for specific purposes: to repay customers, to ensure that it has sufficient reserves to meet anticipated claims and to make any surplus available for distribution to the Big Lottery Fund.
As I have explained, the industry will establish the reclaim fund and it will be a private company. Last year, the BBA and the BSA published a detailed timetable to establish a reclaim fund between now and 2009. That has been updated this month in their most recent press notices. They are proceeding to identify a candidate and to work with them and the FSA to have a reclaim fund up and running next year.
The reclaim fund will invest and manage dormant accounts money prudently to meet reclaim applications. Only money not needed to meet the reclaim risk or reasonable running costs will be released for distribution. The clause should be read alongside schedule 1, which places certain requirements on the reclaim fund. The BBA has stated publicly that costs will be clear and transparent. Schedule 1 makes it clear that expenses cannot be unreasonable.
The hon. Member for Fareham asked how the reclaim fund will establish how much money it needs to keep back. The reclaim fund will determine that in accordance with the FSA rules. The FSA will consult separately on its rules, following Royal Assent.
I shall give more information on the point about costs. The reclaim fund will be able to meet reasonable running costs and have the option to outsource key tasksfor instance, the investment of funds transferred to it. That is necessary if it is to be run efficiently.

Charles Walker: Will the Minister give way?

Ian Pearson: I want to be clear on this point and then I will give way.
The legislation makes it clear that the fund may not defray unreasonable expenses, including making unreasonable payments to third parties. We will debate some of that with schedule 1. The fund may not make distributions to its members, which would be out of keeping with the essential purpose of the scheme, which is to make money available for reinvestment in the community. The industry has made clear that it will defray its costs on a publicly disclosed basis.

Charles Walker: I do not expect the Minister to answer this today, but perhaps he could write to me. He refers to the reclaim fund investing money. It would be helpful to the Committee if we got a note of what asset classes the reclaim fund will be allowed to invest in. I raised that a few moments ago, but it would be helpful in reassuring the Committee that the money will be invested in safe and secure financial instruments.

Ian Pearson: The investment policy of the reclaim fund is not a subject for the Bill. Investment activity would obviously be regulated through the FSA. The private company would determine its investment policy in accordance with the Bill and the prudential regulation regime that we have for companies of this nature.

Question put and agreed to.

Clause 5 ordered to stand part of the Bill.

Schedule 1

Provision to be made in articles of association of reclaim fund

Ian Pearson: I beg to move amendment No. 21, in schedule 1, page 17, line 24, leave out
, the following information in relation to that year.

Joe Benton: With this it will be convenient to discuss Government amendments Nos. 22 to 25 and amendment No. 27, in schedule 1, page 17, line 32, at end insert
(d) the name of each bank and building society in existence who did not transfer money to the fund..

Ian Pearson: The Government recognise that the amended Bill will require the reclaim fund to report directly to Government and to Parliament. We argued in the other place that the requirements then already in the Bill should satisfy any concerns about transparency. However, we have reflected carefully, and the Governments amendments today show that we have listened to the debate and are seeking to reinforce transparency.
It remains our view that requiring the reclaim fund to lay its annual accounts and reports before Parliament is inappropriate and out of keeping with the Bill. When we come to debate clause 6, I will seek to remove that requirement. The Bill sets out how the reclaim fund will be constituted. It does not establish a reclaim fund; that is the task for the industry. Therefore, the reclaim fund will be independent of Government.
Transparency is crucial to the scheme, and as a result of being formed as a company under the Companies Act 2006, the reclaim fund will be required to prepare annual accounts and reports each year. Government amendments Nos. 21 to 25 will require the reclaim fund to publish the information as soon as possible after the end of each financial year, so that it will be available for all to see, including Members.
In addition, I remind the Committee that schedule 1 already requires the reclaim fund to publish annually a list of institutions participating in the scheme; the amounts of money transferred into the scheme by individual institutions; the amounts of money reclaimed by customers from individual institutions; and the aggregate amount passed to the BLF. Therefore, that information will also be available for public scrutiny.
I should like to respond to amendment No. 27, which would require the reclaim fund to publish the names of all banks and building societies that do not participate in the scheme. That amendment is not necessary. A complete list of all banks and building societies operating in the UK is already available from the FSAs website. I can confirm that the FSA updates the list regularly, so it would be easy to compare it with the list of participating institutions, which the reclaim fund would publish as soon as possible after the end of the financial year.
These Government amendments indicate our strong commitment to transparency. We have listened to debate in the other place. That is one of the reasons why we have introduced our amendments today.

Mark Hoban: I want to start by speaking briefly to amendment No. 27. Among the objectives of increasing the transparency of the payments in and out of the reclaim fund are encouraging those banks that have taken advantage of the voluntary nature of the scheme to think carefully about their policies and exposing them to proper public scrutiny. That is why it would be helpful, alongside the list of those banks that have paid into the scheme, to have a list of those that have not. That comparison would make it easier for people to hold to account those institutions that have not participated in the scheme or to understand why they have not.
Some banks and deposit takers might have been set up only relatively recently. As a consequence, they might not have assets over five years old, let alone 15 years old, and they could explain their non-participation in the scheme. It would be helpful to have that complete list, so that people can start to ask the right questions, rather than going to the FSA website to find a list and then compare it. We want to ensure that the publicity and transparency exists to hold those non-participating institutions to account. That is why I proposed amendment No. 27so that we can clearly see the laggards in the process.
I welcome the Government amendments, which reflect some progress in ensuring proper transparency, and I am grateful to the Minister for them. It is better to put the information in the annual report and accounts, rather than in a separate report to be laid before Parliament. Those items must therefore be audited, which will give more comfort on the accuracy of the data to be disclosed.

Martyn Jones: I welcome the Government amendments, particularly in relation to more transparency. If we have a voluntary scheme, as presently proposed, we need transparency to see whether banks and building societies are participating fully. Given that the amendments allow for transparency in terms of the cash amounts given to the reclaim fund, is there any way that the average person in the street can judge how much money is in dormant accounts in those banks and building societies that contribute? We could also judge how many are not contributing at all. As far as I can see, although we have the ability, with the amendments and the Bill, to see how much money goes into the fund, we do not know how much money was available.

Ian Pearson: My hon. Friend makes an interesting point. It is right that the public should be informed of the extent to which individual banks and building societies pass money to the reclaim fund from genuinely dormant accounts and do not hold money back. I understand that he might suspect them of wanting to hold money back for themselves. I do not believe that, but the Bills purpose is not to judge the decisions that individual banks and building societies make about which accounts are dormant and meet the criteria. However, I understand his interest in that.
I welcome the broad support for Government amendments and remind the Committee that, under schedule 1, a lot of information will be available at individual institution level on reclaims from consumers, as well as the amount of money transferred.
I have some sympathy with what the hon. Member for Fareham says in respect of amendment No. 27, and it is good to find ways to identify those who are not participating in the scheme as well as those who are. However, the amendment is not necessary or appropriate. It is not the responsibility of the reclaim fund to horizon-scan industry and identify institutions that are or are not participating. It is more appropriate that the FSA, which has responsibility for regulating the industry, undertake the horizon-scanning exercise and, as I said, that information is available on the FSA website. Compelling the reclaim fund to do something else would not be appropriate.

Jeremy Browne: Given that the Minister is in relevant territory, will he explain the Governments thinking behind making the scheme voluntary rather than mandatory on the financial institution?

Ian Pearson: We discussed the matter on Second Reading and it has been debated previously. The Government consider it right to adopt the voluntary approach. Establishing the reclaim fund as a private sector body to which the institutions contribute voluntarily will maximise the efficiencies by which the scheme will operate. It was welcomed by the hon. Member for Fareham on Second Reading. The banks and building societies have told us explicitly that they will participate in the scheme, and we see no reason not to proceed on a voluntary basis.
Under a voluntary approach, the private sector will take responsibility for managing liabilities to account holders, which will remain on the private sectors balance sheet. The approach gives additional flexibility too, because it allows individual institutions to determine whether an account is genuinely dormant. That is an important additional element of flexibility and such a system will be less rigid than other international schemes, and therefore will help to reduce costs related to unnecessary administration. It also fits in with the spirit of better regulation and existing regulatory arrangements such as the banking code and Financial Services Authority regulation. A voluntary approach can work better than a statutory scheme and ensure that more money is transferred into good causes.

Mark Field: Our concern is relatively straightforward. The reclaim fund will be there to protect public interest, and given the FSAs other work in a range of different areas, it is difficult to see how it will be able to drill down in the way that we have in mind. The amendment tabled by my hon. Friend the Member for Fareham would not put an unreasonable burden on the FSA. None the less, the reclaim fund would have an idea of which building societies and banks had taken account of their responsibilities, whether voluntary or otherwise. That would provide additional protection whereby the public at large would be aware of exactly what was going on.
We agree with the Minister that the amendments would enhance protection, transparency and openness. In keeping with that, I am surprised that he does not feel that our amendment would be part of the seamless improvement set out in the schedule.

Ian Pearson: I understand the point that the hon. Gentleman is making and welcome his support for the Government amendments, which will increase transparency. The question that he must answer is this: is it the responsibility of the reclaim fund to scan the horizon to produce a complete list of banks and building societies operating in the UK? That is not what the reclaim fund is there for, quite transparently. If he believes that the fund should be doing that, the second question he must answer is whether that is a cost-effective use of its resources.
I would much rather that the FSA had that complete listit has a statutory duty to provide such a list, which is available on its websiteand leave the reclaim fund to operate and to publish in a transparent way the information on those participating in the scheme.
There is not a lot between us on this issue. People who examine such matters will quickly look at who is participating in the reclaim fund, compare that with other databases that are readily available from the FSA and others, and, if they want to, engage in a naming and shaming exercise of those who for some reason have decided not to participate.

Mark Hoban: The Minister is in danger of making the matter unduly complicated. There is a list in existence of all banks and building societies that the FSA registers. All the amendment proposes is having a list that says which institutions have paid in and how much, and below that a list of institutions that have not paid in. He proposed doing that through the annual report and accounts; my suggestion was in the context of a specific report to Parliament. The reclaim fund would simply take the list produced by the FSA and mark off those that had not paid in. That would not be an onerous or expensive exercise for it.
Perhaps the Minister will accept the spirit of my amendment and come back on Report with better wording as to where the list would come from and so on, but it should not be a particularly onerous requirement for the reclaim fund to do that and to increase the transparency of the process.

Ian Pearson: In the spirit with which the hon. Gentleman has raised the issue, I say to him that I will reflect on it again. My caution about accepting the amendment or agreeing to do so at a later date relates to the fact that when we put such requirements into legislation, sometimes they turn out to be far more onerous than anticipated. He suggests that it would be a simple matter of taking the FSAs list. If the amendment said that, it might be more workable, but as it stands it does not say that, and it might require the reclaim fund to do a substantial amount of work to prove that it understood why all those organisations were not participating in the reclaim fund, although they were licensed deposit takers.
I will reflect on the point that the hon. Gentleman has made. I share the view that the public should want to know why organisations are not participating in the reclaim fund voluntarily. That is the key aspect that he is trying to push, so if he is prepared to withdraw the amendment, I will certainly reflect on the matter further.

Mark Hoban: Before the Minister concludes, may I go back to a point that he made before we had this digression on who should produce the list? I thought he saidI would like clarity on thisthat it is not the reclaim funds job to scan the horizon and that the FSA should have a role in that. Obviously, it does that in the context of ensuring that all financial services organisations are registered with it. Does the FSA have a role in encouraging banks and building societies to look at the issue of dormant accounts, and should it in any way supervise and regulate the work that they do on reuniting accounts with their rightful owners?

Ian Pearson: It is not my job during consideration of the Bill to comment on the role of the FSA in that respect, but we have a strong commitment from banks and building societies that they will voluntarily participate in the scheme. That is completely the right approach to take and we have no reason to think that any major bank or building society will not want to participate. The situation to which the hon. Gentleman refers is not likely to arise, but I will reflect on his amendment and come back to him.

Amendment agreed to.

Amendments made: No. 22, in schedule 1, page 17, line 24, at end insert
( ) its annual accounts and reports for that year (within the meaning given by section 471 of the Companies Act 2006 (c. 46));.
No. 23, in schedule 1, page 17, line 26, after fund, insert in that year.
No. 24, in schedule 1, page 17, line 28, after fund, insert in that year.
No. 25, in schedule 1, page 17, line 31, after transferred, insert in that year.[Ian Pearson.]

Schedule 1, as amended, agreed to.

Clause 6

Parliamentary accountability of reclaim fund

Question proposed, That the clause stand part of the Bill.

Ian Pearson: As I made clear earlier, we want the reclaim fund to operate in a transparent way. Our amendments show that we have listened to the debate and that we seek to reinforce transparency. We did that with Government amendments Nos. 21 to 25, which require the fund to publish the information referred to in clause 6 as soon as possible after the end of each financial year. That information will be available for all to see, including hon. Members. I hope that that satisfies any concerns that there will not be full transparency and scrutiny of the reclaim fund. However, requiring the reclaim fund to lay its annual accounts and reports before Parliament would be inappropriate and out of keeping with the Bill.
I shall briefly restate why clause 6 is unnecessary and why I oppose it standing part of the Bill. Representations have been made that the reclaim fund should be regarded as a public sector body as a result of the Treasurys direction-making power, which has been discussed, and that that justifies additional parliamentary scrutiny. We have already debated those points, but I want to re-emphasise the fact that the reclaim fund is not a public sector body; it is a private company operating under company law.
As I have said, we do not envisage using the direction-making power to interfere in the day-to-day running of the reclaim fund and the management of its money. The FSA is responsible for regulating the reclaim fund for prudential purposes.
For the reasons I have outlined, the improvements in transparency made by Government amendments Nos. 21 to 25 and the explanations we have given about why we envisage using the direction-making power only in exceptional circumstances mean that a requirement for the reclaim fund to put its annual report and accounts before Parliament would be excessive and unnecessary. That is why I recommend hon. Members not to support clause 6.

Mark Hoban: Given the consensus that we reached on the previous amendments, I do not have a problem with the removal of the clause, but removing subsection (2)(a) would be a retrograde step. That subsection requires the Treasury to
lay before each House of Parliament...any directions issued to a reclaim fund under section 5(4) of this Act.
The Government won the point about whether the positive method for directions should be followed, but now not only will there be no parliamentary scrutiny, but there will be no obligation on the Treasury to publish such directions, which makes the situation even worse.
If we remove the clause in its entirety, no one will know what directions the Treasury has published. The directions might be used in pressing emergenciesto use the Ministers wordsbut it would be helpful if we knew when they had been issued to the reclaim fund. I am sure that this is an over-hasty deletion by the Government, not a deliberate step to keep directions shrouded in secrecy.

Ian Pearson: I welcome the hon. Gentlemans support for removing clause 6. If there is a problem with subsection (2)(a), I will undertake to return to the matter on Report. It is not the Governments intention to be secretive in any way in the wholly unexpected circumstance that we might exercise a power of direction; on the contrary, we would want to ensure that we act transparently. We have debated whether that should be through an affirmative or negative procedure, perhaps because of the requirement for urgency. I will come back to that later should it be necessary or if there is any lack of clarity or transparency.

Question put and negatived.

Clauses 7 to 10 ordered to stand part of the Bill.

Clause 11

Dormant

Jeremy Browne: I beg to move amendment No. 3, in clause 11, page 6, line 37, at end insert and,
(c) the bank or building society in question has exhausted all reasonable efforts to inform the account holder of the funds that bank or building society holds on their behalf..

Joe Benton: With this it will be convenient to discuss Government amendment No. 16.

Jeremy Browne: The amendment would create a statutory obligation for banks to attempt to reunite dormant accounts with their owners. It amends the definition in subsection (1) by adding another paragraph to require the financial institution to have
exhausted all reasonable efforts to inform the account holder of the funds that bank or building society holds on their behalf.
That would ensure that financial institutions exercise appropriate responsibility towards account holders before transferring their money to a reclaim fund. The current system for allowing people to check whether they have dormant accounts centres around the website, www.mylostaccount.org.uk. That presupposes that the account holder knows which institutions their account is with and believes that they have a dormant account in the first place. It is also reliant on voluntary information from the institutions, which can be patchy, and on the account holder being able or willing to use a computer, which we should not assume will automatically be the case. I am not trying to undermine the Bill as a whole but to ensure that the interests of depositors are safeguarded to an even greater degree than it currently envisages by putting that greater obligation on the banks.

Mark Hoban: I wonder whether the hon. Gentleman could expand on the wording of his amendment where he says that
the bank or building society in question has exhausted all reasonable efforts to inform the account holder.
What does he believe that all reasonable efforts might encompass? For example, one bank has employed a tracing agency to track down the owners of accounts holding more than £1,000. Is that reasonable, or would it be expected to go further to include lower-value accounts?

Jeremy Browne: The hon. Gentleman raises a reasonable point. There is a useful debate to be had over how much effort the financial institution should make. Many people take the view that the effort should match the size of the deposit in the account. The process may become not self-defeating but less obviously purposeful if it costs more to try to trace the account holder than the total value of the deposit. If the account held a higher amount of money, I would envisage the efforts going somewhat beyond writing to an account holder at an address at which he resided 15 years or more ago and having a website that he or she could access if they so wished.
There will be several ways in which the banks go about trying to contact longstanding customers who have not been in recent contact. The essential point is that at the moment the banks have insufficient incentive to try to reconnect the dormant bank account holder with his or her dormant bank account and that the Bill does not give them any great incentive to do so. After all, what does the bank stand to gain from tracking down a person who has not been in contact for 15 years or more? Very little. I fear that the bank will do the bare minimum in order to be seen to be doing the right thing and that that will not be good enough in the interests of the individual account holder. I would be pleased if the Minister could assure me that greater and more strenuous efforts will be made.

Mark Field: I want to say a few words about the amendment, with which I have a certain amount of sympathy. I also want to put on record the specific concerns of a constituent of mineMr. Manzetti of Belvedere house in Grosvenor road, Westminsterwhich were answered in part by an exchange of correspondence with the erstwhile Economic Secretary to the Treasury that took place in the summer. Having worked in the insurance industry for more than 35 years, Mr. Manzetti is worried that not enough is being done to seek out the owners of assets, along the lines of the proposal by the hon. Member for Taunton. In a modern world in which there are websites and far more detail that can potentially be demanded and accessed by the public, banks and building societies are becoming more proactive in their efforts to hunt down the owners of assets. Mr. Manzettis experience of this world leads him to believe that there has been a reluctance on the part of insurers and others to follow up unclaimed benefits or dormant accounts. There is still concern as to whether that process has been adequately open.
As the hon. Member for Taunton said, there is now a desire for companies to be required to list on freely accessible websites the names of all holders of unclaimed assets and for part of the cost of that exercise to be borne by advertising of the companys products on those sites. At the moment, as the Minister will be aware, there is a pretty extensive charging regime of some £18 per search. That is a fairly significant disincentive unless the cost is to be paid by an individual who is aware of some unclaimed assets for him or his family.
I also want to put on the record, more broadly, that the Bill provides an opportunity to improve on the reunification process and the procedures for ensuring that dormant accounts go back, where possible, to the correct person. As is betrayed by his surname, many of Mr. Manzettis ancestors come from various parts of Europe, including Italy, Germany, France and the Czech Republic, and several accounts are unknown. That will apply not only to many of my constituents but to those of hon. Members throughout the country. The question is whether enough work is being done by banks and building societies. Where are the incentives to ensure that a proper job is done instead of merely making all reasonable efforts?
In her letter, which is dated 10 August, the erstwhile Economic Secretary mentioned
tracing systems being made more user-friendly.
Can the Minister give some indication as to the nature of those tracing systems and how they can be more user-friendly in a world where people will increasingly access websites through the internet? What process will be put in place to ensure that we do not have a system suitable only for 2008 that becomes defunct in the light of new technology in the years and decades ahead? Is there a commitment from the Government, alongside the banks and building societies, to ensure that this information is kept up to date, as far as possible?
I thank you for your indulgence, Mr. Benton, in allowing me to stray slightly off the line, as I felt that the issues raised by my constituent could best be discussed under clause 11. I hope that the Minister is able to comment on them. I am happy, if need be, to forward the correspondence that was responded to by the then Economic Secretary, who is now Under-Secretary of State for Work and Pensions, the hon. Member for Burnley (Kitty Ussher).

Mark Hoban: This is an opportunity for us to spend a little time thinking about the precursor to the work that the reclaim fund and the Big Lottery Fund will do with dormant accounts. Consumers will want to know that banks have taken all the appropriate steps to ensure that they identify the rightful owners of accounts. The provision is important, because it will give customers confidence that this is not just an exercise to take money out of their accounts and put it in the reclaim fund to be used for the causes mentioned in later clauses. It is important to consider the approach that the banks and building societies use to identify dormant accounts and reunite them with their owners.
Having heard the remarks of the hon. Member for Taunton, I am not sure whether I support his amendment. The word reasonable is difficult to explain and be clear about. Consumers will expect banks take all the appropriate steps that they need to take to identify account owners. The debate that we have had about unclaimed assets and dormant accounts over the past six years, since the first document on such assets was first published, has forced, or encouraged, institutions to consider how they identify those accounts and what steps they should put in place to reunite the accounts with their owners. National Savings and Investments, the Building Societies Association and the British Bankers Association have worked together to set up mylostaccount.org.uk. My understanding is that there have been many more visits to that site, and searches initiated on it, than there were on the previous websites available to bank and building society customers. It appears to have stimulated a great deal of interest in the minds of customers about whether they might have accounts and about initiating the process of searching for them.
Some banks have employed tracing agencies, particularly for larger accounts and customers, and they appear to have been successful. It is interesting that the banks have made quite a lot of progress in whittling down the amount of their unclaimed and dormant accounts. On Second Reading, other hon. Members and I said that HBOS had made significant progress. We want that to continue. No matter how much we want to go to the good causes, we want the banks to have as their first priority trying to reunite those assets and getting their customers to claim them. In the time between now, or Royal Assent, and the setting up of the reclaim fund, we all want the banks to work carefully and diligently to ensure that that takes place. We will touch on the triennial reports in the next series of debates, but we certainly want a mechanism to be in place that shines a light on the activities of institutions in reuniting customers with their accounts.
I am concerned about Government amendment No. 16, deleting subsection (3), which was added in the House of Lords. That subsection would put the onus on the banks to use the knowledge of their accounts, account holders and any other relevant matters in determining dormancy. It would try to encourage banks to take a holistic approach to their customers, to determine whether there was any evidence that they were aware of, or should be aware of, to suggest that the account was not dormant.
Amendments tabled in the Lords stemmed from a series of discussions that tried to define dormancy more carefully. Those amendments were unsuccessful, because there was, rightly, a concern that people did not want statutory impositions placed on the scheme, to try to preserve as far as possible its voluntary nature. Lord Davies of Oldham said in the other place:
The bank can follow its normal procedures for reaching a judgment on whether an account is dormant[Official Report, House of Lords, 10 January 2008; Vol. 697, c. GC344.]
There is some uncertainty, and my amendments Nos. 47 and 46, which we will come to next, highlight some of the dormancy issues. I am not clear in my own mind whether the banking code, which is the fall-back position in this situation, is enough of a prod to ensure that the banks deal with their customers on a fair basis when looking at dormancy. Under the code, each bank will have to publish its own policy on dormancy, but that is voluntary in nature, like so much of the scheme. I am not sure whether that will provide adequate protection for customers, who might see their accounts being declared dormant. Subsection (3), from our perspective, tries to provide some of that protection for consumers. We are disappointed that the Minister seeks to delete the amendment made by the House of Lords.

Ian Pearson: I shall speak to Government amendment No. 16 to clause 11, which refers to the definition of dormancy. It allows us to have a number of debates about that definition and to make some important points about the priority that we all attach to reuniting customers with their savings.
The Government have made it clearthis is a widely shared view in the House that reuniting customers with their money should be a priority for the scheme and that, whenever possible, efforts should be made to ensure that customers are reunited with money that is rightly theirs. That is one reason why we welcomed the launch of mylostaccount.org.uk by the BBA, the BSA and NS&I early this year, and the industrys commitment to reach out to hard-to-reach and disadvantaged customers. The website has the potential to provide an efficient and effective means for customers to trace their lost accounts and for concerns about personal data to be respected.
As we have heard, since its launch on 30 January, the site has had nearly 190,000 search forms submitted for money left unclaimed in a dormant bank, building society or NS&I account. The Government are always interested in ideas for improving such arrangements, but it is obviously a matter for banks, building societies and NS&I to ensure that they have effective arrangements in place.
To reinforce a point that I made on Second Reading, searches are possible through multiple institutions. Website guidance suggests that, if someone is searching just one institution, it might be best to approach it direct, but multiple searches are allowed. As the hon. Member for Fareham said, there has been an increase in the number of people who have been reunited with their money.

Mark Field: Given what the Minister says, is he comfortable with the explosion in numbers since the website was set up at the beginning of the year? Does he believe that it is adequate and open enough or that it is simply a playing of the numbers game? Does he understand some of the concerns mentioned by Opposition Members about the fact that there seems to be a lack of incentive on the part of too many of those who will benefit from the system to put in place an entirely open one? At what point will he be satisfiedperhaps it has been reachedin his own mind that enough is being done to ensure that dormant accounts are being reunited with their owners?

Ian Pearson: As I said, I am always interested in ideas for improving the arrangements for reuniting, but I acknowledge the step change in activity this year. We want that progress to continue, and I shall certainly be interested in talking to banks and building societies about their reuniting activities. It should be a priority for them to ensure that they reunite customers with their money, and we all share an interest in ensuring that they are doing all that they reasonably can.
The hon. Member for Cities of London and Westminster raised a specific constituency issue, and I shall trace the correspondence to ensure that the Government are taking any action that we should be taking. To reinforce the point, banks and building societies are committed to reuniting and have made significant efforts to do so.
On the point made by the hon. Member for Fareham, transferring accounts that are not truly dormant is not in the interests of banks and building societies, because they would have to bear the up-front costs of any subsequent reuniting.
The hon. Member for Cities of London and Westminster made a point about insurance companies paying for tracing services. As he knows, the Bill is about the dormant accounts of banks and building societies onlyother assets and institutions pose questions for another day.

Mark Hoban: The Minister said that it would not be in a banks interest to transfer accounts that are not dormant because they will bear the up-front cost of the transfer. However, when an account is transferred to the reclaim fund, the cash and liability are in effect transferred as well, so there is no cost to the bank.

Ian Pearson: Certainly administrative and time costs are associated with transferring funds to a reclaim fund and then back again. The hon. Gentleman is right that the assets and liability are transferred, which is one of the purposes of the Bill. I wish that I could reassure him on Government amendment No. 16 and why we want to delete subsection (3). I emphasise that we intend genuinely dormant bank and building society accounts lost by the account holder to be transferred into the scheme, but not accounts that are simply rarely used or where the account holder is still aware of their account. That will minimise the unnecessary costs associated with returning accounts to customers after a transfer.
We believe that our definition of dormancy is simple, clear and straightforward: an account open throughout a period of 15 years with no customer-initiated transactions. However, the scheme allows banks and building societies the flexibility to refer to customer-initiated activities that might indicate that an account is not dormant even where there have been no transactions on the account. If the institution is aware of activity, such as the requesting of periodic statements, we fully expect institutions not to transfer accounts. Furthermore, those with particularly strong or individualised systems can take that into account in their individual policies. That flexibility is one the schemes great strengths. I am happy to confirm that institutions will be expected to use their knowledge of such matters. That was indicated in our consultation and is set out clearly in the explanatory notes. It is unnecessary to require in legislation that institutions use their knowledge; that would add nothing to the scheme and have a detrimental impact on the clarity of the definition. That is why our approach has been supported by industry.

Mark Hoban: I want to return to the Ministers point about customer-initiated activity. He used the example of a customer asking for a statement of their account. The point at which the statement was requested might indicate whether the customer still knew of the account. If the statement had been requested at the end of year 1 and we were now in year 16, with no customer activity in that intervening period, one would expect that account to be deemed dormant. However, does that activity have to be related specifically to that account? What if a customer has, say, an insurance policy through a bank that is wholly unrelated to the account? I assume that such activity would not impact on the definition of dormancy made by the bank.

Ian Pearson: It is up to the bank to judge whether an account is dormant. That is a key point. Banks and building societies will publish their policies on their interpretation of a dormant account. We believe that it is important to have a clear definition in legislation of dormancy, while allowing banks and building societies the discretion to use their own judgment. In the Bill, it is immediately apparent when the minimum definition of dormancy has been achieved: if there has been a transaction within the past 15 years, the account cannot be considered dormant; if there has not, it can be. The BSA has said that the ability to take account of other forms of customer contact is particularly important to it, and it supports the Bill as introduced. The BBA has also welcomed the ability to take into account other indications whether an account is genuinely dormant.
I do not think that there is any difference between our intentions. We are saying clearly that subsection (3) and the amendment tabled by the hon. Member for Taunton would muddy the waters and make the position less clear. Our professional advice from those in the industry states that they would much prefer to have a clear definition and the flexibility to use their own judgments and publish their own policies, rather than having requirements introduced under the Bill.

Martyn Jones: As my hon. Friend is probably aware, I am concerned about the flexibility for banks and building societies to make their own definitions of dormancy, thereby limiting the amount of money that they may have to give up to the reclaim fund. One of my concerns involves something that he just mentioned. I am interested to hear whether there will be any compulsion on banks and building societies to give their definition of a dormant bank account. If not, there may be a problem of definition.

Ian Pearson: There is a requirement on banks and building societies, as part of the banking code, to publish their dormant accounts policies. That is covered. Again, the key point is that it is emphatically the case that banks will want to use their judgment to make reasonable decisions on whether accounts are dormant. We want to create a clear definition of dormancy and then allow banks and building societies to exercise their judgment. Tests such as those in subsection (3), which was inserted in the other place, are not regarded by the BSA or the BBA as helpful. They would fetter the discretion of the institutions to make reasonable judgments on whether accounts were dormant and get in the way of general practice.
I support amendment No. 16 and oppose amendment No. 3. I emphasise that it is not in anybodys interest to transfer accounts unless people have lost touch and the accounts are considered dormant. If they are not dormant, there is at least an administrative cost involved. I also emphasise that this is customers money. If a customer goes through the door of a bank or building society and says that he or she wants their money, they will be able to get it, subject to the necessary checks. If the money has been transferred as dormant, it will be reclaimed by the bank from the reclaim fund, and as far as the customer is concerned, they will just be withdrawing their money from their bank account, as they have a right to.

Jeremy Browne: I am not massively reassured by the Ministers statement that the associations representing banks and building societies are not keen for more onerous requirements to be put on them; I had expected that. Nevertheless, I take his point, which is that it is difficult specifically to define a more onerous requirement. When I moved the amendment, that point was reasonably put to me in an intervention by the hon. Member for Fareham.
As the Minister said, all parties seem to share the overall objective of trying to make the requirement as strong as possible, but given that it is difficult to frame it legislatively, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mark Hoban: I beg to move amendment No. 47, in clause 11, page 6, line 38, leave out
at any time during that period.

Joe Benton: With this it will be convenient to discuss amendment No. 46, in clause 11, page 7, line 3, at end insert
(2A) Where under the terms of the account withdrawals were prevented or there was a penalty or other disincentive for making withdrawals, the period of dormancy as set out in subsection (1)(a) above will start when withdrawals can be made or when the penalty or other disincentive expires.

Mark Hoban: This is a probing amendment on the wording of subsection (2). I understand that if money is sitting in an account from which withdrawals are not allowed, or if there is a penalty or a disincentive to making withdrawals, the account cannot be deemed to be dormant. The money will sit for ever on the banks balance sheet as an asset or a liability. Because the money is unlikely ever to be declared, the bank will decide not to try to reunite it with its owner. However, I realise that many accounts, for short periods, involve a penalty for early withdrawal, including loss of interest. Even if those penalties were effective for only a short time, those accounts would never be deemed to be dormant.
I looked on the internet to find some examples. I found the Alliance & Leicester eSaver issue 2 account, in which interest is foregone in any month in which a withdrawal is made. That account would therefore fall foul of subsection (2)(b)(ii), which states that
there was a penalty or other disincentive for making withdrawals.
On that basis, such an account could never be said to be dormant.
Another was a fixed-rate bond accountnot at Alliance & Leicesterthat paid a high interest rate but with no access for at least a year. That would fall foul of subsection (2)(b)(i), which states that withdrawals are prevented. I am not sure whether that is the intention of the provision, but it is certainly the impression that it left in my mind. That is why I tabled amendments Nos. 47 and 46, which suggest that the period of dormancy should be calculated from the time when the penalty expires. For the Alliance & Leicester eSaver account, the period of dormancy would start after a year, so rather than it being declared after 15 years, it would be 16 years after the account was opened.
I would be grateful for some clarity on the thought processes behind subsection (2).

Ian Pearson: I shall deal first with amendment No. 47, which I appreciate is probing. The amendment would delete the words
at any time during that period
from subsection (2). We understand that the intention is to clarify the fact that if an account holder has requested no contact, or if the account is a of type that prevents or includes a disincentive for making withdrawals, the period for calculating dormancy can begin only once the restrictions are lifted. We believe that the clause already achieves that, and that omitting those words is unnecessary and makes the point less certain. The amendment would remove the emphasis that if at any time an account becomes subject to those restrictions, it cannot be considered dormant.
Amendment No. 46 is designed to clarify the fact that a period of dormancy cannot include any time during which any penalties or disincentives for withdrawals apply. The hon. Member for Fareham gave several examples. Although we agree with the intention, clause 11(2) already achieves that effect. In the case of an account with fixed-term or no-mail restrictions, the clause ensures that the 15-year period of inactivity required to meet the dormancy definition cannot begin until those restrictions have ended. These proposals are not necessary, as they would not achieve anything that the Bill does not already ensure. I therefore invite the hon. Gentleman to withdraw the amendment.

Mark Hoban: I am grateful to the Minister for that clarification. He has set out why my amendments are unnecessary, and I think that the clause is meant to achieve what my amendments are designed to do. The only thing that slightly sticks in my own mind is the phrase if at any time, because there may be a one-year period when withdrawals are prevented, but the fact that there is a one-year period means that the account cannot be declared dormant.
An account may have been open for 15 years, but if at any time there was a period when withdrawals were prevented, that account could not be made dormant. I think that that is how the phrase if at any time works in the context of the clause.
I think that the Minister and I are on the same wavelength with what we want to achieve, but I am not sure that the drafting of the clause quite gets there yet. I will be happy to withdraw amendment No. 47 and not press amendment No. 46, but I hope that he will look again at the wording of the clause to ensure that it does not inadvertently rule out a swathe of accounts from being dormant. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ian Pearson: I beg to move amendment No. 15, in clause 11, page 7, line 3, at end insert in all circumstances.
It is clear that when defining dormancy as a period without customer-initiated activity, we should not include accounts where no activity on the account is an integral feature of it. In the case of fixed-term accounts, whereby the money is locked in for a period of years when no transactions are permitted without significant penalties, the 15-year clock should start ticking only when those conditions expire at the end of the term.
The clause covers all accounts. In the case of a fixed-term account, it ensures that the 15-year period of inactivity required to meet the dormancy definition cannot begin until the fixed-term restrictions have ended. However, in respect of certain types of account that could be considered to fall under this exclusion, such as those where a short notice period is required before a withdrawal can be made, it has been argued that the position is not totally clear. The hon. Member for Fareham was getting at that point a moment ago.
We want to make it clear that such notice accounts are eligible for inclusion in the scheme. For those accounts, a period of 15 years without customer-initiated activity will still be a good indicator of dormancy, subject to the other conditions that the banks and building societies have committed to taking into account through the banking code. Our amendment clarifies the position to ensure that only accounts where a genuine penalty or disincentive is applied to any withdrawal are to be prevented from being considered for dormant status. We hope that this technical amendment clarifies the situation.

Mark Hoban: The amendment might well address the issue that I was probing earlier, but I am not entirely clear that it does that. Although I welcome the amendment, it does not entirely remove the objections that I referred to. Although the Minister has clarified what the amendment is designed to do, and I think that we are working towards the same end, I am still not sure that the wording if at any time is entirely neutralised by the addition of in all circumstances.

Amendment agreed to.

Amendment made: No. 16, in clause 11, page 7, line 4, leave out subsection (3).[Ian Pearson.]
Further consideration adjourned.[Mr. Blizzard.]

Adjourned accordingly at one minute to One oclock till Wednesday 15 October at half-past Two oclock.